The Occurence and Impact of Pension Fund Discontinuity

S.G. van der Lecq, G.A.G. Alserda, O.W. Steenbeek

Research output: Working paperAcademic

Abstract

Collective pension arrangements tend to yield higher risk-adjusted pension benets than individual plans due to intergenerational risk sharing and the lack of annuity conversion risk. These benfits pose the implicit assumption that the pension fund has an innite horizon, while we observe that many pension funds discontinue. Using case studies of six discontinued pension funds, in combination with a simulation model, this paper analyses the occurrence and impact of pension fund discontinuity.
Although discontinuity tends to increase the volatility of pension benets, median benets in most institutional settings increase after discontinuing the fund. We nd that both the occurrence and impact of discontinuity depends strongly on the institutional setting of the pension fund. Stricter regulations, such as more conservative discount rates, increase the financial stability of the pension fund; however, they may reduce membership support through lower replacement rates. This poses a trade-off in the design of the pension system.
Original languageEnglish
Place of PublicationRotterdam
PublisherERIM
Pages1
Number of pages38
Publication statusPublished - 2017

Publication series

NameERIM Research Series
NameERIM Research Series
No.008
Volume2017

Fingerprint

Discontinuity
Pension funds
Pensions
Annuities
Median
Financial stability
Discount rate
Trade-offs
Simulation model
Replacement rate
Pension system
Intergenerational risk sharing

Cite this

van der Lecq, S. G., Alserda, G. A. G., & Steenbeek, O. W. (2017). The Occurence and Impact of Pension Fund Discontinuity. (pp. 1). (ERIM Research Series), (ERIM Research Series; Vol. 2017, No. 008). Rotterdam: ERIM.
van der Lecq, S.G. ; Alserda, G.A.G. ; Steenbeek, O.W. / The Occurence and Impact of Pension Fund Discontinuity. Rotterdam : ERIM, 2017. pp. 1 (ERIM Research Series). (ERIM Research Series; 008).
@techreport{f366d29956f44f2584077dfae5dfcc97,
title = "The Occurence and Impact of Pension Fund Discontinuity",
abstract = "Collective pension arrangements tend to yield higher risk-adjusted pension benets than individual plans due to intergenerational risk sharing and the lack of annuity conversion risk. These benfits pose the implicit assumption that the pension fund has an innite horizon, while we observe that many pension funds discontinue. Using case studies of six discontinued pension funds, in combination with a simulation model, this paper analyses the occurrence and impact of pension fund discontinuity.Although discontinuity tends to increase the volatility of pension benets, median benets in most institutional settings increase after discontinuing the fund. We nd that both the occurrence and impact of discontinuity depends strongly on the institutional setting of the pension fund. Stricter regulations, such as more conservative discount rates, increase the financial stability of the pension fund; however, they may reduce membership support through lower replacement rates. This poses a trade-off in the design of the pension system.",
author = "{van der Lecq}, S.G. and G.A.G. Alserda and O.W. Steenbeek",
year = "2017",
language = "English",
series = "ERIM Research Series",
publisher = "ERIM",
pages = "1",
type = "WorkingPaper",
institution = "ERIM",

}

van der Lecq, SG, Alserda, GAG & Steenbeek, OW 2017 'The Occurence and Impact of Pension Fund Discontinuity' ERIM Research Series, ERIM Research Series, no. 008, vol. 2017, ERIM, Rotterdam, pp. 1.

The Occurence and Impact of Pension Fund Discontinuity. / van der Lecq, S.G.; Alserda, G.A.G.; Steenbeek, O.W.

Rotterdam : ERIM, 2017. p. 1 (ERIM Research Series), (ERIM Research Series; Vol. 2017, No. 008).

Research output: Working paperAcademic

TY - UNPB

T1 - The Occurence and Impact of Pension Fund Discontinuity

AU - van der Lecq, S.G.

AU - Alserda, G.A.G.

AU - Steenbeek, O.W.

PY - 2017

Y1 - 2017

N2 - Collective pension arrangements tend to yield higher risk-adjusted pension benets than individual plans due to intergenerational risk sharing and the lack of annuity conversion risk. These benfits pose the implicit assumption that the pension fund has an innite horizon, while we observe that many pension funds discontinue. Using case studies of six discontinued pension funds, in combination with a simulation model, this paper analyses the occurrence and impact of pension fund discontinuity.Although discontinuity tends to increase the volatility of pension benets, median benets in most institutional settings increase after discontinuing the fund. We nd that both the occurrence and impact of discontinuity depends strongly on the institutional setting of the pension fund. Stricter regulations, such as more conservative discount rates, increase the financial stability of the pension fund; however, they may reduce membership support through lower replacement rates. This poses a trade-off in the design of the pension system.

AB - Collective pension arrangements tend to yield higher risk-adjusted pension benets than individual plans due to intergenerational risk sharing and the lack of annuity conversion risk. These benfits pose the implicit assumption that the pension fund has an innite horizon, while we observe that many pension funds discontinue. Using case studies of six discontinued pension funds, in combination with a simulation model, this paper analyses the occurrence and impact of pension fund discontinuity.Although discontinuity tends to increase the volatility of pension benets, median benets in most institutional settings increase after discontinuing the fund. We nd that both the occurrence and impact of discontinuity depends strongly on the institutional setting of the pension fund. Stricter regulations, such as more conservative discount rates, increase the financial stability of the pension fund; however, they may reduce membership support through lower replacement rates. This poses a trade-off in the design of the pension system.

M3 - Working paper

T3 - ERIM Research Series

SP - 1

BT - The Occurence and Impact of Pension Fund Discontinuity

PB - ERIM

CY - Rotterdam

ER -

van der Lecq SG, Alserda GAG, Steenbeek OW. The Occurence and Impact of Pension Fund Discontinuity. Rotterdam: ERIM. 2017, p. 1. (ERIM Research Series). (ERIM Research Series; 008).